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Venezuela's Carabobo tender for seven new heavy crude blocks in the Orinoco belt could be facing trouble as reports of delays and conflicts between bidding firms and the country's oil ministry emerge.

"There was a big meeting or confrontation between the bidding IOCs and the minister on March 5," an industry source told BNamericas, adding that companies told the ministry that they could not accept the current terms of the tender because of market conditions.

"The threat, implied or explicit, is that they would not bid if he did not make some concessions on the three main conditions for bidders including financing, percentage of recovery and the final destination of the oil," the source added.

Venezuela's state oil company PDVSA said in December that 19 companies had purchased the US$2mn data package for the round.

Besides creating JVs to operate the seven new blocks, the round also calls for the construction of three new heavy crude upgraders in the Soledad municipality of Anzoátegui state with capacities around 200,000b/d.

Offers were to have been due on April 16, but the oil industry has been expecting delays.

"There has been nothing official, but the ministry has been telling companies they are at least a month behind schedule," another source said, adding that the ministry had been slow in answering questions and offering guidelines.

The February 15 referendum could have also slowed down the process as government officials and PDVSA employees focused on campaigning for a Chávez victory.

Financing has long been expected to pay a big role in the tender process.

While PDVSA will require at least a 60% stake in any JVs formed from the tender process, the company will ask JV partners to finance at least 30% of its share.

Aggressive bidders could theoretically offer to finance for more than 30% of PDVSA's 60% stake.

Many industry analysts have said that the collapse in oil prices could give participating companies some room to negotiate with both the oil ministry and PDVSA.

NORWAY'S PERSPECTIVE

The Norwegian embassy in Caracas, meanwhile, confirmed in an article on its website that StatoilHydro (NYSE: STO) would participate but said the tender had been delayed by two or three weeks.

The company already has a 9.67% stake in the Petrocedeño JV in Venezuela.

"This is the first international tender for new blocks in more than 10 years," the embassy said in the article. "It includes three enormous projects valued from US$15-20bn."

"StatoilHydro is currently conducting technical and economic evaluations of the tender, and its current stake in Petrocedeño should prepare it well for the analysis," the embassy added.

StatoilHydro still is participating in the round, a company spokesperson told BNamericas.

"We are focused on further growth in Venezuela and a further expansion of StatoilHydro business in the country fits very well with company strategy," the spokesperson added, declining to comment on the embassy statement or the timing of the tender.

The Norwegian embassy later told BNamericas that it could not confirm delays to the tender and had removed the statement from its website.

"The embassy cannot confirm that there will be delays to the Carabobo tender," the embassy spokesperson said. "This part of the article is the result of an unfortunate misunderstanding between the embassy and its source. We are sorry to have caused confusion."

NO RISK OF COLLAPSE

Many analysts, however, said the tender would ultimately go through because of its sheer importance to the industry.

"I don't think the Carabobo tender is at risk of collapsing," Gianna Bern, an energy analyst and president of Chicago's Brookshire Advisory and Research, said.

"For PDVSA, the Carabobo tender is of strategic importance and a critical part of the company's publicly stated longer term strategic plan. Like most tenders, they are extremely complex and all subject to varying levels of negotiations," she said.

"However, I do think the economics of the current oil environment will prompt bidders to open discussion to items not previously under consideration."

Spokespersons for Venezuela's oil ministry were not immediately available for comment when contacted by BNamericas.

My notes

BNamericas delivers on-the-ground insight and trusted business intelligence to companies and investors active in and entering Latin America. Identifying opportunities early on and connecting clients with decision-makers across 12 industries, BNamericas is the edge your company needs in Latin America.

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Methodology & Procedures

Definitions

Projects covered include state-owned and private projects in the Infrastructure, Electric Power, Oil & Gas (excluding upstream), Water and Waste, and Mining sectors.

Where applicable, a project is considered as such until the end of construction and ramp-up to full capacity (with the exception of mining projects, where the date of commissioning signifies the end of the project). Projects must have a:

Data

For state-owned projects, initial information about the start date and estimates for completion and investment are taken from original signed contracts, along with addendums and annexes.

If original contracts cannot be obtained, information is taken from public documents, presentations, news articles from BNamericas archives, and external sources.

In cases where contracts are subject to approval by legislators, the start date is the date of the law or legislative approval.

In the case of private projects, information is taken from public sources, such as stock exchange filings, annual reports, company presentations, third party research and press releases.

In judging the timing of investment decisions for private projects, great care was taken to differentiate between large projects receiving environmental approval and proceeding directly to construction, and smaller projects where the investment decision hinges on securing financing.

Best care is taken to ensure that recorded data is correct at the time of entry and that each entry is backed with a relevant source.

The greatest care possible was taken to ensure consistency of information in order make a like-for-like comparison in project costs. Insofar as the figures rely on disclosure by the organization or company responsible, the figures can be considered to be conservative in nature.

No attempt was made to adjust figures for inflation during the course of research or for consideration of the time value of money.

Validation

In the case of state-owned projects, validation is carried out where possible with either a member of the consortium, EPC contractor, a relevant state agency or advisors to either party.

Currency

Projects costs are measured in US dollars. Where project costs are measured in a local currency, amounts are converted to US dollars at the date of the relevant announcement, signature or report.

Severity of deviation from original estimates

The severity of deviation from original estimates is defined according to set criteria.

Timing

Status

Condition

Ahead of time

95% of original estimate or below (measured in months)

On time

95% to 105% of original estimate

Minor changes

105% to 120% of original estimate

Medium changes

120% to 160% of original estimate

Major changes

Over 160% of original estimate

Budget

Status

Condition

Ahead of budget

95% of original budget estimate or below

To budget

95% to 105% of original budget estimate

Minor changes

105% to 120% of original budget estimate

Medium changes

120% to 140% of original budget estimate

Major changes

Over 140% of original budget estimate

Changes in Scope

Changes in scope beyond the start date are not accounted for.

Language definitions

Where guidance is non-specific as to dates for completion, the following is used. Project to be completed by 2018 = December 31, 2017 Project to be completed in 2018 = December 31, 2018